removing utilities from inclusion in lease - Posted by JA (AL)


Posted by JA (AL) on January 17, 1999 at 19:42:33:

Thank you for your response. The utilities come to an average of $785 a mo. based on the past 12 mos. payments. Since there are 2 vacant offices and 4 rented, I will pay some of them myself. However, the proration of utilities is the time consuming part. It is better, I believe, just to average it out and charge the same each month to each tenant based on the square footage they lease. Seems pretty fair–and BTW, the tenants ARE lawyers. Rents as low as $575 in a building only one block from the new multi-million dollar courthouse. I don’t expect too much of a hassle. One lawyer has been here for 10 yrs. He can certainly afford an increase of $130. If I can find 2 more tenants, my cash flow would be about $945 mo. And the building is selling at 70k below appraisal. once I find more tenants I will put it on the market again.


removing utilities from inclusion in lease - Posted by JA (AL)

Posted by JA (AL) on January 17, 1999 at 13:27:01:

I am buying an office building with 4 tenants who have low monthly rents and the utilities are included. My cash flow would be seriously compromised unless I set up a utility share for all tenants. It will actually come to about $130 average a month for electric, gas, garbage, water. Not bad but can I remove this from the old lease and charge, say, by the square footage? The present lease says its agreements terminate upon the sale of the property. I won’t increase the rents for awhile but the utilities must be separated. Can I do that?


Re: removing utilities from inclusion in lease - Posted by Randy -IL-

Posted by Randy -IL- on January 17, 1999 at 18:17:09:

First and Foremost, you should have your whole deal and lease reviewed by your attorney. Sometimes it is necessary to tell your attorney how you want the end result to be and to do what it takes to get there.

If the current lease is to be terminated upon sale of the property, then all you need to do is to have a new lease stating that tenants are responsible for utilities. The current lessor should also give the tenants official notice of the termination of the current lease.

But what I would do, is to write a new lease that increases the rent to the market value that includes utilities. I would find the highest monthly bills from the landlord, add them up and add that amount to the rents and split as fair as I see fit. The tenants won’t have a clue that their neighbors pay more or less for their utilities if it is included in the rent. They won’t care.

I think you might run into problems splitting the bill differently each month to each tenant. Besides that it would be kinda labor intensive to do the paper work, billing, etc.